In this article, we will look at the 11 Undervalued Stocks with Biggest Upside Potential.
On December 13, Katerina Simonetti, Private Wealth executive vice president at Morgan Stanley, appeared on a CNBC Television interview to discuss her stock market outlook. Earlier, she had released a note stating that she expects the US stock market to significantly outperform other international markets into 2026. She elaborated that she is cautiously optimistic about the stock market, mainly due to the technology sector and some new market challenges that are expected to arise in 2026.
Simonetti noted that there is no way to hide the excitement regarding the AI revolution and its potential. However, the market is now entering a new phase in the AI trade as the focus is shifting from AI infrastructure development to applicability and return on investment. She expects 2026 to be the “show me the money” year, which she believes requires a pinch of caution amidst the excitement.
Much like the general consensus, Simonetti also expects the Fed to cut rates in 2026. She expects 3 rate cuts next year. However, she also pointed out that the Federal Reserve’s decision to cut the rates would be based on the economy and the labor market. Some of the most influential factors that can alter these decisions include the impact of tariffs, as Simonetti believes the economy is yet to realize the true impact of the tariff policies. She added that the Fed deciding not to cut in 2026 can result in a downward surprise for the market, considering the premium valuations of the technology sector and the stock market in general.
Now that we have discussed the market outlook, let’s take a look at the 11 Undervalued Stocks with Biggest Upside Potential.
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Our Methodology
To curate the list of 11 Undervalued Stocks with Biggest Upside Potential, we used the Finviz stock screener, Seeking Alpha, CNN, and Insider Monkey’s Q3 2025 hedge fund database as our sources. Using the screener, we aggregated a list of stocks trading below the forward price to earnings ratio of 15 for which analysts see more than 30% upside. Next, we cross-checked the upside potential from CNN and P/E ratios from Seeking Alpha. Lastly, we ranked the stocks in ascending order of the upside potential. We have also added the hedge fund sentiment around each stock sourced from Insider Monkey’s database. Please note that the data was recorded on December 14.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
11 Undervalued Stocks with Biggest Upside Potential
11. EOG Resources, Inc. (NYSE:EOG)
Forward P/E Ratio: 10.35
Number of Hedge Fund Holders: 61
Analyst Upside Potential: 30.27%
EOG Resources, Inc. (NYSE:EOG) is one of the Undervalued Stocks with Biggest Upside Potential. On December 15, Leo Mariani from Roth MKM reiterated a Hold rating on the stock with a $114 price target. Earlier on December 12, Josh Silverstein from UBS reiterated a Buy rating on EOG Resources, Inc. (NYSE:EOG), but lowered the price target from $144 to $141.
Leo Mariani of Roth MKM noted that they expect the next few quarters to be soft for the oil sector. Despite a cautious view on the sector, the analyst noted that EOG Resources, Inc. (NYSE:EOG) is optimistic on the natural gas market in 2026 and expects to deliver higher prices. Moreover, the company also raised its preliminary fiscal 2026 organic volume slightly up from the previously flat outlook.
On the other hand, Silverstein has a more optimistic view of the energy sector. He sees the sector as strongly positioned to perform well in 2026, driven by improved oil and natural gas outlook, emerging OFS opportunities, attractive valuations, and M&A-driven value creation among other factors.
That said, earlier on December 3, Raymond James had also maintained a Buy rating on EOG Resources, Inc. (NYSE:EOG) with a $153 price target. The analyst noted that the company exceeded expectations on most of its operating metrics during the fiscal Q3 2025. He added that the company’s total production exceeded expectations by 2%, along with oil volumes remaining in-line with the firm’s expectations. The firm also likes the 5% increase in free cash flow guidance for 2025, which is driven by lower operating costs of $10.10 per barrel of oil equivalent versus the previous cost of $10.35.
EOG Resources, Inc. (NYSE:EOG), a U.S.-based oil and gas producer, operates large-scale shale assets across the Permian, Eagle Ford, Utica, and domestic gas resources.
10. XP Inc. (NASDAQ:XP)
Forward P/E Ratio: 9.81
Number of Hedge Fund Holders: 22
Analyst Upside Potential: 30.55%
XP Inc. (NASDAQ:XP) is one of the Undervalued Stocks with Biggest Upside Potential. On December 12, Mario Pierry from Bank of America Securities reiterated a Hold rating on XP Inc. (NASDAQ:XP) with a $22 price target.
Pierry from Bank of America Securities noted that while the CEO Thiago Maffra has outlined key strategic priorities for 2026, the earnings for the year are only expected to grow by around 8%. Maffra noted that the company will be focusing on standardizing Independent Financial Advisors’ services, developing alternative distribution channels, and expanding premium services to lower-tier customers. Despite these efforts, the earnings growth is expected to be limited mainly due to limited growth in revenue yield and an expected increase in investment in the B2C channel.
Moreover, the analyst expects that these efforts will lead to increased engagement and enhanced customer experience, which will help earnings in the long term. However, in the short term, earnings are expected to stay limited due to elevated interest rates and essential investments.
That said, XP Inc. (NASDAQ:XP) grew its fiscal Q3 2025 revenue by 17.04% year-over-year to $875.65 million and surpassed estimates by $11.84 million. Moreover, the EPS of $0.46 also came in slightly ahead of the consensus by $0.01. The growth was mainly driven by a 12% year-over-year increase in total client assets, which reached R$1.4 trillion in Q3.
XP Inc. (NASDAQ:XP) is a technology-driven financial services platform that operates primarily in Brazil, offering a wide range of low-fee products and services to both retail and institutional clients. The company’s business includes wealth management, securities brokerage, investment management, and corporate and issuer services, such as M&A advisory.
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